Tough economic times don’t stymie the entrepreneurial spirit.
While almost 40 percent of startup owners believe the economy overall will deteriorate over the next 12 months, 98 percent of 18-30 year olds and 83 percent of the 31-40 year-olds are confident their businesses will still post higher profits.
“While overall confidence has fallen, it is encouraging that these businesses have decided to start up in the first place even amid continuing uncertainty over the macro-economy,” said Dane Stangler, director of research and policy at the Kauffman Foundation.
Indeed. a study from the University of Missouri School of Public Affairs said entrepreneurial activity increases during tough economic times.”Recessions seem to offer bigger windows of opportunities (greater access to displaced skilled workers) to startups of only a few employees,” the study said.
Missouri Innovation Center President and Chief Executive Officer Jake Halliday said he isn’t surprised to see an uptick in entrepreneurial activity.
“Corporate downsizing and R&D outsourcing to contract R&D providers has resulted in large numbers of highly skilled scientists and engineers making life changes,” he said. ” For the displaced professionals, necessity is the mother of invention – the necessity to replace previously high income has prompted some professionals to form companies to commercialize their ideas.”
But recessions put added pressures on startup companies.
“The entrepreneur’s strategic decision making process must contend with increased risk and uncertainty during and economic recession (because of) the reduced availability of resources and rising costs,” the study said.
According to the Kauffman Foundation release, entrepreneurs are nervous about consumer spending, but are planning to grow regardless.
“Entrepreneurs require persistence and fortitude,” said John Suh, CEO of LegalZoom in the Kauffman release. “It is encouraging to see that nearly 100 percent of younger entrepreneurs are confident in their future profitability, and this conviction has not been affected by the current economic climate.”
If entrepreneurs persist it might be worth their while. According to the MU study, more than half of the global 500 companies were started during a recession or a period where the stock market dipped more than 20 percent.